Rupert Murdoch remains the grand experimenter, announcing in an interview in The Australian Financial Review last week (not available online) that he will launch a newspaper designed exclusively for tablet devices, including the i-Pad. It will be called The Daily.

According to what Rupert told the Fin, it will be launched in six weeks and sell for a dollar day. His comments suggested it would be aimed at the US market, and he said he needed 800,000 readers to make it viable. So far as I am aware, it will be the world’s first tablet-only newspaper, but probably not the last.

The truth is that the smart minds at both of Australia’s major newspaper companies are more or less assuming — or at least hoping — that tablet readers and the iPad in particular are the saviours of the business, and will lure readers again into paying for content.

As devotees of the new device know, iPad apps are the impulse purchase du jour. Most only cost a few dollars a pop, which means once you are signed up for an iTunes account, it’s easy to by one, leaf through it, as it were, and discard it. Just like a newspaper.

Murdoch predicted that by the end of 2011 there will be 30 million to 40 million iPads in use.”I believe every single person will eventually have one, even children.”

I think he’s probably right about IPad ownership. But are he and the others thinking along the same lines right about the “cool new toys” changing people’s current unwillingness to pay for news content online?

Recent research has found that seven out of 10 Australians say they would not consider forking out for news online, with young people being particularly unwilling.

There are some early signs, though, that people may be more willing than they think. Last week Rupert released the first results of his paywall experiment in the UK, under which the Times and Sunday Times online became viewable only by  those who paid to do so.

Read this for the detail, but the general picture is a huge drop of site traffic, which was predictable.

But News Corporation is claiming that 105,000 people have paid to read the publications online, with about half of those being subscriptions to the Kindle or iPad editions, and the others being casual users. As well, about 100,000 subscribers to the print version have activated a paid online account at no extra cost.

On these figures, the tablet readers are indeed crucial to the success of the model.

Now, some of the Times figures have been driven by giveaways and cheap initial offers, but the early figures are promising. The thing everyone will be watching is whether the revenue from the subscribers betters that which would be received from advertising if the site traffic was higher.

One of the great truths of online is that revenue from ads is utterly miserable to the rivers of gold that used to flow from print advertising. There is so much advertising real estate around that there is no such thing as a premium price for an online ad.

TechCrunch’s Eric Schonfield has done the back of the envelope work on News Corporations’s figures, and thinks it’s looking good.

The maths goes like this:

50,000 monthly subscribers at $US12.80 a month, yielding $640,000 a month in total.

55,000 casual pay-as-you-go readers — another $US160,000.

Total: $800,000 a month, or $9.6 million a year in online subscription revenues.

Meanwhile, Schonfield estimates, the drop in site traffic would add up to 41 million estimated page views a month, which he estimates adds up to only $200,000 a month in online advertising revenue.

Which means that so far the indications are that paid content online works better from a revenue point of view than free to air.

And remember that all this is being achieved by the Times, in Britain, which like Australia has a great deal of free-to-air content generated by a public broadcaster.

We are talking about a model that relies less on mass audiences, and more on small audiences who are intensely engaged enough to fork out for the daily fix.

But does it work well enough? Will the subscribers stick once the novelty and cheap offers wear off? Will the figures ever be enough to sustain anything like the newsrooms of old?

This week, Fairfax Media holds its annual general meeting, to be followed by an investor day at which it will outline its long-term strategy. The buzz is that, just as at News Limited, the “cool new toys” are the focus of a great deal of thinking.

To date, the iPad applications of our major newspapers look very much like poor relations — clunky to use, slow to load, a long way short of what can be achieved. But that will change.

Nobody really knows if the tablet editions will work from a news business point of view. But Murdoch is not the only one putting many eggs in that particular basket.

Peter Fray

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